The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership
Georgia Charging Order
Ga. Code § 14-8-28. Partner’s interest subject to charging order
(a) On due application to a competent court by any judgment creditor of a partner or of any assignee of an interest in the partnership, the court which entered the judgment, order, or decree, or any other court, may charge the interest of the debtor partner or such assignee with payment of the unsatisfied amount of such judgment debt with interest thereon and may then or later appoint a receiver of his share of the profits, and of any other money or other assets due or to fall due to him in respect of the partnership, and, subject to subsection (b) of this Code section, make all other orders, directions, accounts, and inquiries which the debtor partner or such assignee might have made, or which the circumstances of the case may require.
(b) An interest charged pursuant to subsection (a) of this Code section is not liable to be seized and sold by the judgment creditor under execution.
(c) The interest charged may be redeemed or purchased without thereby causing a dissolution:
(1) With separate property, by any one or more of the partners; or
(2) With the partnership property, by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold.
(d) Nothing in this chapter shall be held to deprive a partner of his right, if any, under the exemption law, as regards his interest in the partnership.
(e) In addition to the remedy conferred by subsection (a) of this Code section, the interest of a partner in the partnership may be reached by a judgment creditor by process of garnishment served on the firm, provided that the complaint upon which the judgment was obtained was personally served upon such partner.
(f) Subject to subsection (b) of this Code section, the remedies conferred by subsections (a) and (e) of this Code section shall not be deemed exclusive of others which may exist.
Ga. Code § 14-9-703. Rights of creditors
(a) On application to a competent court by a judgment creditor of a partner or of any assignee of a partner, the court may charge the partnership interest of the partner or such assignee with payment of the unsatisfied amount of the judgment, with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the partnership interest. This chapter shall not deprive any partner of the benefit of any exemption laws applicable to his partnership interest.
(b) The remedy conferred by this Code section shall not be deemed exclusive of others which may exist, including, without limitation, the right of a judgment creditor to reach the interest of a partner in the partnership by process of garnishment served on the partnership.
Ga. Code § 14-9A-52. Rights of judgment creditors of limited partner
(a) On due application to a court of competent jurisdiction by any judgment creditor of a limited partner, the court may charge the interest of the indebted limited partner with payment of the unsatisfied amount of the judgment debt and may appoint a receiver and make all other orders, directions, and inquiries which the circumstances of the case may require.
(b) The interest may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property.
(c) The remedies conferred by subsection (a) of this Code section shall not be deemed exclusive of others which may exist.
(d) Nothing in this article shall be held to deprive a limited partner of his statutory exemption.
LIMITED LIABILITY COMPANIES
Ga. Code § 14-11-504. Rights of judgment creditors
(a) On application to a court of competent jurisdiction by any judgment creditor of a member or of any assignee of a member, the court may charge the limited liability company interest of the member or such assignee with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the limited liability company interest. This chapter does not deprive any member of the benefit of any exemption laws applicable to his or her limited liability company interest.
(b) The remedy conferred by this Code section shall not be deemed exclusive of others which may exist, including, without limitation, the right of a judgment creditor to reach the limited liability company interest of the member by process of garnishment served on the limited liability company, provided that, except as otherwise provided in the articles of organization or a written operating agreement, a judgment creditor shall have no right under this chapter or any other state law to interfere with the management or force dissolution of a limited liability company or to seek an order of the court requiring a foreclosure sale of the limited liability company interest.
by Jay Adkisson
2021.02.21 ... Creditor’s Early Motion For A Receiver Gets The Kabosh In Medipro Case
2021.02.15 ... Debtor’s Large LLC Distribution To Circumvent Charging Order Draws Ire Of Non-Debtor Member In Bargreen
2021.01.19 ... Equitable Remedy To Circumvent Charging Order Exclusivity Denied In Ramos
2020.12.17 ... Louisiana Court Of Appeals Rejects Busting Of Single-Member LLC In AOK Property
2020.11.28 ... Uniform Law Commission Creates Drafting Committee To Clean Up And Modernize American LLC Law
2020.11.26 ... Contempt Not Precluded By Charging Order Exclusivity In Gengs
2020.11.23 ... Charging Order Against Interest Of LLC In Bankruptcy Held Not To Violate The Automatic Stay In Nilhan
More Articles On Charging Orders click here
LAW REVIEW ARTICLES
by Jay Adkisson
For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN: https://ssrn.com/abstract=2928487
Analysis of Uniform Limited Liability Company Act Sections re Charging Orders
The Uniform Acts re Charging Orders and Transferable Interests (without Jay's comments):
Effect of Bankruptcy On The Debtor-Member's LLC Interest here
Collected Court Opinions On Charging Orders here and below
NATURE OF REMEDY
Distributions/Economic Rights - Creditors rights to distributional interests/economic rights
Prejudgment Relief - Freezing the interest and distributions pending judgment
Procedure - The procedure for obtaining a charging order and ancillary provisions
Unknown Interest - Where the debtor's interest, if any, has not been ascertained
Order Form Generally - Most issues to the form of the charging order
Order Form Future Interests - How the charging order affects subsequently-acquired interests
Exemptions - Available state and federal protections that may apply to charging orders
Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute
Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs
Foreign Entities - Charging orders against out-of-state entities
Creditor Rights Restrictions - Limitations on creditors' management and informational rights
Information Rights - Creditors' ability to access information about the LLC
Management & Voting Rights - Rights of creditor after charging order issued
LIEN EFFECT AND PRIORITY
Lien - The lien effect of a charging order and priority issues
Compliance - Issues for the LLC and non-debtor members in complying with a charging order
Receiver - The role of the receiver in charging order proceedings
SINGLE MEMBER LLC
Single-Member LLCs - Enforcing the judgment against an LLC with a sole member
Foreclosure - Liquidation by judicial sale of the debtor's right to distributions
REPURCHASE AND REDEMPTION RIGHTS
Repurchase/Redemption Rights - Third-parties' ability to purchase the charged interest
Appeal - Issues relating to the appeal of a charging order
RELATION TO OTHER REMEDIES
Exclusivity - The charging order as the sole remedy available to creditors and exceptions
Voidable Transactions/Fraudulent Transfers - Issues relating to avoidable transfers of interests
Abstention - Attempts to collaterally attack the charging order in federal court
Bankruptcy - Treatment of the debtor/member's interest in bankruptcy
Intra-Member Disputes - Where one member obtains a charging order against another
Taxes - Tax issues relating to charging orders for all involved parties
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Additional Court Opinions About charging orders (unsorted)
THE CHARGING ORDERS PRACTICE GUIDE
The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more
Available for purchase directly from the ABA at https://goo.gl/faZzY6
Also available from Amazon at https://www.amazon.com/Charging-Orders-Practice-Guide-Understanding/dp/1641052643
OTHER INFORMATIONAL WEBSITES
by Jay Adkisson
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© 2021 Jay D. Adkisson. All Rights Reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. This site is https://chargingorder.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.